Impact of Environmental Flow Policy on Power System Balancing Costs and River Ecosystem Service Benefits: A Case Study of the Ossauskoski Hydropower Plant in the Kemijoki River, Finland

42 Pages Posted: 2 Feb 2024

See all articles by Artti Juutinen

Artti Juutinen

Natural Resources Institute Finland

Zeeshan Tahir Virk

University of Oulu

Hannu Huuki

University of Oulu - Department of Economics, Accounting and Finance; Government of the Republic of Finland - Finnish Environment Institute

Enni Ruokamo

Government of the Republic of Finland - Finnish Environment Institute

Maria Kopsakangas-Savolainen

Finnish Environment Institute; University of Oulu - Department of Economics, Accounting and Finance

Ali Torabi Haghighi

University of Oulu

Hannu Marttila

University of Oulu

Date Written: January 10, 2024

Abstract

Sustainable river regulations need more information on the costs and benefits of environmental flow constraints. This paper presents a case study focusing on the Nordic electricity market and ecosystem service situation. We impose tighter flow ramping constraints on a hydropower plant situated in the Kemijoki River and quantify the effects of the environmental flow policy on hydropower balancing services, river hydraulics and ecosystem services. Our findings reveal that as the environmental flow policy becomes more stringent, the optimal level of balancing market flexibility decreases for the hydropower operator. In addition, a detailed hydrological flow analysis indicates that ecological improvements resulted from the policy. We also compare the costs and benefits of the environmental flow policy. The findings indicate that the costs, hydropower revenue loss and increased system balancing costs are comparable to the willingness to pay for environmental improvements in the current power system. If system balancing can be achieved without an increase in CO2 emissions, the willingness to pay for the improved river state increases, widening the gap between local benefits and system costs. The study insights can inform policymakers and private companies in the effective management of environmental concerns in regulated rivers while acknowledging the value of hydropower in the power system.

Keywords: Cost‒benefit analysis, Hydropeaking, Environmental flow, Balancing market, Ecosystem services

JEL Classification: Q57, Q51, Q58, Q40

Suggested Citation

Juutinen, Artti and Virk, Zeeshan Tahir and Huuki, Hannu and Ruokamo, Enni and Kopsakangas-Savolainen, Maria and Torabi Haghighi, Ali and Marttila, Hannu, Impact of Environmental Flow Policy on Power System Balancing Costs and River Ecosystem Service Benefits: A Case Study of the Ossauskoski Hydropower Plant in the Kemijoki River, Finland (January 10, 2024). Available at SSRN: https://ssrn.com/abstract=4689556 or http://dx.doi.org/10.2139/ssrn.4689556

Artti Juutinen

Natural Resources Institute Finland ( email )

Zeeshan Tahir Virk

University of Oulu ( email )

P.O. Box 4600
Oulu FIN-90014, 90570
Finland

Hannu Huuki (Contact Author)

University of Oulu - Department of Economics, Accounting and Finance ( email )

PO Box 4600
FIN-90014 University of Oulu
Finland

Government of the Republic of Finland - Finnish Environment Institute ( email )

00260 Helsinki
Finland

Enni Ruokamo

Government of the Republic of Finland - Finnish Environment Institute ( email )

Latokartanonkaari 11
Helsinki, 00790
Finland

Maria Kopsakangas-Savolainen

Finnish Environment Institute ( email )

PO Box 413
Oulu, 90014
Finland

University of Oulu - Department of Economics, Accounting and Finance ( email )

PO Box 4600
FIN-90014 University of Oulu
Finland

Ali Torabi Haghighi

University of Oulu ( email )

Hannu Marttila

University of Oulu ( email )

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